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This paper examines the cost of deflation in the context of Japan's ongoing deflationary episode. The impact of deflation owing to the zero interest rate bound on monetary policy, wage rigidity, redistribution of wealth from debtor to creditor, and inflexibilities in the financial sector are examined. It is seen that the generalized decline in the Japanese price level, however gradual or mild, has substantially exacerbated the economy's adjustment process under already difficult economic conditions.

Deflation (Finance) --- Monetary policy --- Wages --- Disinflation --- Finance --- Banks and Banking --- Inflation --- Macroeconomics --- Personal Income, Wealth, and Their Distributions --- Price Level --- Deflation --- Monetary Policy --- General Financial Markets: General (includes Measurement and Data) --- Wages, Compensation, and Labor Costs: Other --- Interest Rates: Determination, Term Structure, and Effects --- Asset prices --- Consumer price indexes --- Real interest rates --- Prices --- Financial services --- Price indexes --- Interest rates --- Japan

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Using a panel dataset of 34 emerging market countries for the period 1990-2002, we examine the roles of various economic, political, and institutional variables in determining fiscal effort, as proxied by the primary surplus. We find that while fiscal effort increases, as expected, with the level of lagged debt, this effect tapers off beyond a certain threshold. We also find an inverse U-shaped relationship between the primary balance and revenue. Fiscal effort rises with positive shocks to oil prices (for oil exporters), when the economy grows above its potential, and in the presence of an IMF-supported program. In contrast, high democratic accountability and strong and impartial bureaucracies help lower market risk and hence lower the relative need for fiscal adjustment. Finally, fiscal effort tends to decline when too many constraints are faced by the executive.

Debts, Public -- Developing countries. --- Electronic books. -- local. --- Fiscal policy -- Developing countries. --- Macroeconomics --- Public Finance --- Production and Operations Management --- Fiscal Policy --- Macroeconomics: Production --- National Government Expenditures and Related Policies: General --- Public finance & taxation --- Fiscal policy --- Fiscal stance --- Output gap --- Fiscal consolidation --- Expenditure --- Production --- Economic theory --- Expenditures, Public --- United States

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This paper evaluates monetary policy and its relationship with the exchange rate in five Asian crisis countries. The findings are compared with previous currency crises in recent history. The paper finds no evidence of overly tight monetary policy in the Asian crisis countries in 1997 and early 1998, nor evidence that high interest rates led to weaker exchange rates. The usual trade-off between inflation and output when raising interest rates suggested the need for a softer monetary policy in the crisis countries to combat recession. However, in some countries, corporate balance sheet considerations called for the reversal of overly depreciated currencies through firmer monetary policy.

Banks and Banking --- Foreign Exchange --- Inflation --- Money and Monetary Policy --- Financial Markets and the Macroeconomy --- Comparative or Joint Analysis of Fiscal and Monetary Policy --- Stabilization --- Treasury Policy --- Interest Rates: Determination, Term Structure, and Effects --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Price Level --- Deflation --- Currency --- Foreign exchange --- Finance --- Monetary economics --- Macroeconomics --- Exchange rates --- Real interest rates --- Currencies --- Real exchange rates --- Financial services --- Money --- Prices --- Interest rates --- Indonesia

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This paper examines two main aspects of the interaction between fiscal and monetary policy in emerging market economies. First, it explores the interest rate-inflation relationship in economies with different levels of external and domestic public debt using panel- and crosssection data. The results show that interest rate-inflation elasticity weakens with debt/GDP and external debt/GDP. Second, it utilizes high-frequency data from Brazil, Turkey, and Poland to examine how market-determined variables react to economic news. The results suggest that when vulnerabilities are high, budget news has the most significant impact on country spreads and interest rates, and the impact of monetary policy is weakened.

Debts, Public. --- Electronic books. -- local. --- Fiscal policy. --- Political Science --- Law, Politics & Government --- Public Finance --- Tax policy --- Taxation --- Debts, Government --- Government debts --- National debts --- Public debt --- Public debts --- Sovereign debt --- Government policy --- Economic policy --- Finance, Public --- Debt --- Bonds --- Deficit financing --- Banks and Banking --- Foreign Exchange --- Macroeconomics --- Fiscal Policy --- Interest Rates: Determination, Term Structure, and Effects --- Debt Management --- Sovereign Debt --- Currency --- Foreign exchange --- Finance --- Public finance & taxation --- Fiscal policy --- Exchange rates --- Fiscal stance --- Long term interest rates --- Interest rates --- Debts, Public --- United States

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Deflation can be costly and difficult to anticipate, and concerns of a generalized decline in prices in both industrial and emerging market economies have increased recently. This paper investigates the causes and consequences of deflation, the risk of deflation globally and in individual countries, and policy options. The authors discuss issues related to the measurement, determinants, and costs of deflation and examine previous episodes of deflation. They compute an index of deflation vulnerability, which they apply to the 35 largest industrial and emerging market economies. Finally, the paper offers several policy options for protecting against deflation and for coping with it should it strike.

Deflation (Finance) --- Monetary policy. --- Prices. --- Commercial products --- Commodity prices --- Justum pretium --- Price theory --- Consumption (Economics) --- Cost --- Costs, Industrial --- Money --- Cost and standard of living --- Supply and demand --- Value --- Wages --- Willingness to pay --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Disinflation --- Finance --- Prices --- Investments: Metals --- Finance: General --- Inflation --- Macroeconomics --- Production and Operations Management --- Price Level --- Deflation --- Macroeconomics: Production --- General Financial Markets: General (includes Measurement and Data) --- Metals and Metal Products --- Cement --- Glass --- Ceramics --- Monetary Policy --- Investment & securities --- Monetary economics --- Output gap --- Asset prices --- Stock markets --- Production --- Consumer prices --- Economic theory --- Stock exchanges --- Gold --- Financial services industry --- Monetary policy --- United States